Monday, November 15, 2010

Weekly Cashews Update

NOV 13, 2010

Cashew market continued to climb up in Week 45. Business was done for W240 around 3.95, W320 around 3.65, W450 around 3.45 FOB with reports of some sales few cents higher as well. Volume traded was not large but there was good demand from all markets. Although most of the sales were for Nov-Jan shipments, there was reasonable interest for shipments upto Mar/Apr as well. Prices for broken grades in Indian domestic market jumped up by over 10% in the last ten days.

The RCN prices in Tanzania also moved up and they continue to be ahead of kernel parity (even with the rising kernel prices). The high RCN prices seem unsustainable but since there is limited RCN availability, it does not seem that prices will ease unless there is a withdrawal or reduction in kernel buying activity.

For the last three weeks, people have been expecting that there will be resistance to the higher prices and that buying interest would cool down. On the contrary, prices have been moving up every week by 2-3% and there is continued buying interest despite the rising prices. There has been short covering against delays plus some fresh buying to cover future requirements. Some market or the other has always been buying. This continued buying (volumes are not large as offers are limited) coupled with higher RCN prices due to limited availability + concerns about Brazil crop are providing support to the firm trend & rising prices. Brazil processors are unlikely to offer any significant quantities until their crop situation is clear – right now, it looks very bad but things could change in the next couple of months.

The current high price – about 50% higher than the average of last 18 months and the highest ever seen - should certainly have some impact on usage (especially the promotions). Extent of impact is uncertain (there seems to be very little impact in Asia). Lower kernel availability will also reduce the adverse impact of higher prices on total demand. Rawmaterial availability will be tight until second quarter 2011 – it will ease after May/Jun PROVIDED the North crops are good. Till then, reduction in demand will not have much impact on kernel prices which can soften only if RCN prices come down with good arrivals. Of course there should be a “pain” threshold for cashew prices (like everything else) but it is impossible to judge when that will be reached.

For the time being, attention is focussed on the supply side and everything points to a continued firmness – so far each wave has shown higher top. Until the supply situation changes or there is a clear indication of a large decline in demand, this trend is not likely to change. When the trend changes, the speed of price change will depend on the extent of the change in supply or demand (and equally important, the sentiment of all stakeholders).

To sum up, it is very difficult to predict which way things will move. People are working with short term positions and this makes things very dangerous – a small development can trigger a significant move.

In these difficult times, what are your comments on market situation and your views on prospects / trends ? Any special news or information ?

Pankaj N. Sampat

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